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Kuwait is OPEC’s fourth-largest crude oil producer.
According to Oil and Gas Journal, as of January 2010 Kuwait’s territorial boundaries contained an estimated 101.5 billion barrels (bbl) of proven oil reserves, roughly 8 percent of the world total. The Partitioned Neutral Zone (a.k.a. Divided Zone, Neutral Zone), which Kuwait shares 50-50 with Saudi Arabia, holds an additional 5 billion bbl of reserves, bringing Kuwait's total oil reserves to 104 billion bbl. Click here for a map of major oil fields from Kuwait’s Ministry of Oil.

Top Proven World Oil Reserves, January 1, 2010

The Supreme Petroleum Council oversees Kuwait’s oil sector and sets oil policy. The Kuwait Petroleum Council (KPC) manages domestic and foreign oil investments. KOC, nationalized in 1979, is KPC’s upstream arm in Kuwait. The Kuwait Gulf Oil Company (KGOC), set up in 2002, oversees the bulk of Kuwait’s interests in the Neutral Zone. Most Kuwaiti crude oil is sold on term contracts, with the price of Kuwaiti crude oil tied to Saudi Arabian Medium (for western customers) and a monthly average of Dubai and Oman crudes (for Asian buyers).

Most of Kuwait's oil reserves are located south of Kuwait City. The 70-billion bbl Greater Burgan area, which comprises the Burgan, Magwa and Ahmadi fields, is widely considered the world's second largest oil field, surpassed only by Saudi Arabia's Ghawar field. Producing oil since the 1950’s, Greater Burgan generally produces lighter crudes with API’s in the 28°-36° range, and has a production capacity of 1.6 million bbl/d. The South Magwa field (discovered in 1984) is estimated to hold at least 25 billion bbl of light crude.

Other fields surrounding the Greater Burgan area include Umm Gudair, Minagish, and Abdaliya. Umm Gudair and Minagish produce heavier crude oil, with gravities in the 22°-26° API range, and have a combined production capacity of 200,000 bbl per day. In January 2003, water injection began at Minagish to enhance oil recovery and offset natural declines in production.

Northern Kuwait holds the majority of Kuwait’s larger fields after Greater Burgan. Kuwait’s second largest field, Raudhatain, was discovered in 1955 by KOC, and has 9.55 billion bbl of proven and probable recoverable oil. Raudhatain has the capacity to produce 450,000 bbl of oil per day.

Partitioned Neutral Zone
The Partitioned Neutral Zone (PNZ) was established in 1922 to settle a territorial dispute between Kuwait and Saudi Arabia. The PNZ encompasses a 6,200 square-mile area and contains an estimated 5 billion bbl of oil and 1 trillion cubic feet (Tcf) of natural gas. A Joint Operations Committee, with representatives from both Kuwait and Saudi Arabia, manages the resources in the PNZ. Kuwait is represented by the Wafra Joint Operations Group, and Saudi Arabia is represented by Chevron. Oil production capacity in the PNZ is currently about 600,000 barrels per day, all of which is divided equally between Saudi Arabia and Kuwait.

Onshore production in the PNZ centers on Wafra. On stream since 1954, Wafra is the largest of the PNZ’s onshore fields with approximately 3.4 billion in proven and probable reserves. Wafra has related production facilities and gathering centers with South Umm Gudair and South Fuwaris. Onshore production in the PNZ has a capacity of around 274,000 bbl/d.

The production capacity of offshore fields in the PNZ is 300,000 bbl/d, with almost 90 percent coming from Khafji. Offshore production is about four times as expensive in the PNZ as in the rest of Kuwait. Khafji, an extension of Saudi Arabia’s Safaniyah (the world’s largest offshore field), Hout, also an extension of Safaniyah, and Dorra, an extension of Iran’s Arash, are the largest fields. Dorra is not currently under production pending resolution of boundary demarcation negotiations between Kuwait and Iran.

Production & Consumption
In 2009, Kuwait’s total oil production approximated 2.5 million barrels per day (bbl/d), including approximately 300,000 bbl/d production from the PNZ; 2008 total oil production was roughly 2.7 million bbl/d (PNZ production roughly the same). Of 2009 production, 2.3 million bbl/d was crude and approximately 200,000 bbl/d was non-crude liquids. Overall, around two-thirds of Kuwaiti oil production comes from the southeast of the country. Kuwait’s total oil consumption equaled roughly 350,000 bbl/d in 2008.

OPEC Crude Oil Production 2009

Most of Kuwait’s major producing fields are over sixty years old, and therefore field maturity is becoming a concern. In 2005, KOC, citing field exhaustion, lowered its production plateau estimates for the Greater Burgan area from 2 million bbl/d to 1.7 million bbl/d over a 20-30 year period. This issue places added significance on development of other Kuwaiti reserves going forward.

Kuwait's Total Liquids Production and Consumption, 1980-2008

Kuwait plans to increase crude oil production capacity from its current 2.6 million bbl/d to 4 million bbl/d by 2020, largely via Project Kuwait (PK). Progress towards enacting PK, however, remains caught in the disagreement between Parliament and the ruling family on how best to proceed.

Kuwait's constitution - and longtime policy - bars foreign investment in the country's natural resources, except as provided for by law. In order to allow IOC involvement, "incentivized buy-back contract" (IBBC) arrangements, which do not involve production sharing, concessions, or the "booking" of reserves by foreign companies, have been created. The structure of the IBBC agreements allows the Kuwaiti government to retain full ownership of oil reserves, control over oil production levels, and strategic management of the ventures. Foreign firms are to be paid a "per barrel" fee, along with allowances for capital recovery and incentive fees for increasing reserves, in their role as service provider/contractor. In May 2007, the Kuwaiti ruling family conceded the responsibility to approve each related IBBC for Project Kuwait to Parliament.

PK aims to increase the country's oil production capacity from four northern oil fields – Raudhatain, Sabriya, Ratqa, and Abdali - to 3.5 million bbl/d by 2015, and then 4 million bbl/d by 2020 with the help of international oil companies (IOC). Heavy oil is a major component of Kuwait’s increased production capacity plans. Estimated heavy oil reserves of approximately 13 billion bbl are located primarily in the north of Kuwait.

KOC also plans to drill for oil in South East Kuwait and West Kuwait. In South East Kuwait, which holds the vast Burgan field, production is to increase by 200,000 b/d to a total of 1.7 million bbl/d; KOC hopes to maintain capacity in West Kuwait at 500,000 b/d.

Kuwait is expected to increase its crude oil production capacity by approximately 170,000 bbl/d in 2011 with Gathering Center (GC) 24 in the Sabriya oil field. Western Kuwait’s GC-16 is expected to add another 100,000 bbl/d in production capacity, but its startup date is uncertain.

Kuwait exports the majority of its crude and refined products to the Asia-Pacific region.
In 2008, Kuwait’s total exports of crude oil and refined products reached nearly 2.4 million bbl/d. The Asia-Pacific region received approximately 1.5 million bbl/d, the United States received approximately 210,000 bbl/d, and Western Europe received 180,000 bbl/d. Kuwait's single export blend ("Kuwait Export") has a specific gravity of 31.4°API (a typical medium Mideast crude), and is considered sour with 2.52 percent sulfur content.

Top Kuwaiti Petroleum Export Destinations, 2008

Mina al-Ahmadi is the country's main port for the export of crude oil. Kuwait also has operational oil export terminals at Mina Abdullah, Shuaiba, and at Mina Saud. To handle increased production generated by Project Kuwait, a new terminal is planned for construction on Bubiyan Island.

Kuwait's three domestic refineries have a combined capacity of roughly 936,000 bbl/d. The country's largest refinery is Mina al-Ahmadi, with capacity of 466,000 bbl/d, followed by Mina Abdullah (270,000 bbl/d) and Shuaiba (200,000 bbl/d).

Kuwait Petroleum International (KPI; a.k.a. “Q8”) manages KPC's refining and marketing operations internationally, with approximately 4,000 retail stations across Western Europe (Belgium, Spain, Sweden, Luxembourg, and Italy). KPI owns an 80,000 bbl/d refinery in Rotterdam, Netherlands and has a 50:50 joint venture with AGIP in the 240,000 bbl/d capacity refinery in Milazzo, Italy.

With the growth of downstream markets in Asia, Kuwait is interested in acquiring downstream assets in large emerging markets such as China. In China’s Guangdong Province, KPC is negotiating a partnership with China’s Sinopec and Dow Chemical Company. The plant will feature a 300,000 bbl/d capacity refinery and a 1 million tons per year ethylene steam cracker.

Clean Fuels Project
The Clean Fuels Project (CFP) is the umbrella under which Kuwait’s existing refineries will be upgraded. With a 2008 price tag of $18 billion, the CFP is split into three packages. In Package 1, Mina Abdullah’s distillation capacity will be increased to 420,000 bbl/d. Package 2 will consist of revamping Mina Abdullah’s utilities both on and offsite. Package 3 will restore and repair necessary elements of Mina Al-Ahmadi.

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May 2010
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